I don't need to go in the history of this stock, as many of you know we rode it from $4 all the way to $11.50 and took profits between $10-$11.50. The trouble is many of us, including me, bought it in the 9's and all the way back down until the halt.

We finally got some clarity today, and the data I have received so far is not horrible at all, in fact it's probably more good than bad when you drill into the details. So let me help us do that;

As the Company disclosed in its current report on From 8-K filed on April 16, 2010, AMEX required that the Company submit a plan of compliance by April 29, 2010 with the action the Company has taken, or will take, to file the 10-K for 2009 and bring the Company into compliance with the listing standards no later than July 14, 2010 (the "Plan"). As AMEX required, the Company submitted its Plan on April 29, 2010, which the Corporate Compliance Department of AMEX currently is evaluating. As stated in the current notice from AMEX, the Company may supplement its Plan until June 8, 2010. The Company intends to submit such supplement by June 8, 2010.

This basically means the company has until June 8th to submit a supplement to their plan if they choose to do so. The plan is there only for the exchange, so the exchange can approve NEP to remain listed on the exchange. I don't see this as being a problem, as stated previously by investor relations, it's fully expected that NEP will meet the requirements of the exchange to stay listed.

The Company also previously disclosed in a press release issued on April 16, 2010 and as an exhibit to its current report on From 8-K filed on April 16, 2010, that, in the process of the Company's 2009 year end audit review, the Company identified potential internal control deficiencies over financial reporting in connection with certain expenditures relating to business development activities and the accounting treatment of certain of the Company's accounts payables. In response, on April 15, 2010, the Board of Directors directed and authorized the Audit Committee of the Board of Directors (the "Audit Committee") to conduct a thorough review of the situation and to determine what corrective action, if any, should be taken.

So this basically means that someone in the company had an expense account, and made some expenses to the company which need to be reviewed.

On April 19, 2010, the Audit Committee retained the services of John Lees Associates Limited of Hong Kong("JLA") to conduct a forensic audit of the Company's bank accounts with respect to the expenditures relating to business development activities in question.

This is great news: John Lees Associates are an accounting firm in Hong Kong that deals with some large companies, they do work for the bank of China, they are not a fly by night group.

The forensic audit preliminarily found that in 2009, cash transfers occurred between the bank accounts of the Company and its subsidiaries and the personal bank accounts of Mr. Hongjun Wang, the Company's chief executive officer, and Ms. Guizhi Ju, a Company director and mother of Mr. Hongjun Wang. The forensic audit has confirmed that some of the transferred funds were used to pay the Company's expenses. To date, there is no indication that any of the funds were used for personal purposes. The forensic audit is ongoing.

In other words, the CEO and his mom had created expense reports to the company. No, I don't think it was for coke and whores, considering these guys are big shareholders of the company and certainly don't want to hurt their share position. That said, those of us who understand the culture in China - this type of thing happens all the time. This was once a very small company, they would treat it like their own company - but as it grew their lack of controls were apparent and they likely made some mistakes as to how they draw money from the company. They also mention there is no indication that the money was used for personal purposes. They probably had big expense accounts, the accountant is very thorough.

The good news is they were accounted for as expenses, some sort of expenses. So it should likely not affect the income of the company. The other good news, if the CEO removed money for personal reasons he will then in turn owe it back to the company.

The potential bad news is if they drained the company of all its cash, well that would make it difficult to run their business. Highly unlikely considering the company is still running, the CEO is a major shareholder, he is apparently very upset - and he has not been arrested. So this scenario is likely not the case, I just wanted to throw it out there just incase you run into a forum full of haters

Immediately following the JLA preliminary report, on May 6, 2010, the Board of Directors adopted a specific policy that none of its assets, including cash, should be transferred or paid to any officer or director of the Company or its subsidiaries for any purpose without the approval of the Audit Committee other than (i) payment of transfers pursuant to service agreements between the Company and its officers and directors duly authorized and adopted by the Board of Directors or its committees; or (ii) reimbursement of reasonable expenses not exceeding $10,000 in any given week.

More good news! New accounting controls shows the board actually cares, the board is effectively running the company and making sure this never happens again.

After an update of the preliminary report by JLA, the Board called a special meeting to discuss the situation onMay 21 and 22, 2010. As a result of these meetings, on May 23, 2010, the Board through unanimous written consent took the following corporate actions:

(i) Accepted the resignation of its chief financial officer, Mr. Yang Zhang, and appointed Mr. Andrew Kan from JLA to serve as interim acting chief financial officer until a permanent chief financial officer is duly appointed.

Good news, how did the CFO not know this happened? Or maybe he did and didn't think it was a big deal. Either way he has to go - and the new CFO is a rockstar.

(ii) Accepted the resignation of Ms. Ju as a director of the Company.

Bye mom! Good news.

(iii) Accepted the resignation of Mr. Hongjun Wang as the Chairman of the Board but allowed him to continue as a director pending the outcome of the current forensic audit.

This tells me he really wants to stay on with his company. He knows he made a mistake -- and if it was huge he would have been fired completely. This is a SARBANES/OXLEY audit, get your shit together, and get this CEO out.

(iv) Appointed the Company's independent director, Mr. Edward Rule, as Chairman of the Board.

Good news. This guy is one of the people leading the charge to get NEP back to a clean reporting standard.

(v) Placed Mr. Hongjun Wang on administrative leave as chief executive officer pending the outcome of the current forensic audit.

Good, need to get some people who understand the capital markets and know how to run a large company.

Anyone know who this is? Jingfu Li has worked with Petro China for years, he has a good relationship with them - and likely why he's with NEP to begin with!

(vii) Directed that all expenditures of the Company and its subsidiaries over US$10,000 be approved in advance by the Chairman of the Audit Committee.

Great, no more mom and pop expense reports.

The Company believes that these remedial measures will prevent further failure of the Company's financial controls and procedures and preserve the assets of the Company. As the forensic audit continues, the Company is treating this serious matter with the utmost urgency. Upon further findings of the forensic audit, the Company will continue to implement measures as the situation demands.

About China North East Petroleum

We will hear more disclosures over the coming weeks.

The good news is the stock will NOT resume trading until we get full disclosure as to what's going on. We will have to see a 10K, and the exchange will obviously have to approve their plan. The best case scenario is we start trading in June with a 10K. The worst case scenario is we start trading sometime in late July. Either way, I view this part as very good -- because the last thing we need is a panic, not to mention a bunch of bears coming in to short the shit out of your fear when you don't really know what's going on.

Overall I'm happy to have some clarity here, and I was once a shareholder of Tyco. I don't think this is anywhere near a Tyco style situation, but I do know Tyco recovered and I did very well on the trade. Good wishes to all, and screw the haters, ignore them. They are running out of ammo on this one.

There's a saying I love and I live my life by it, it's often attached to a fable of a great king who is humbled by the simple words: This too shall pass.

ps: I HIGHLY recommend you read the biographies of the people involved